Norwegian posts Q3 2019 profit despite severe 737 MAX impact
Norwegian Air Shuttle has posted $183.35 million (NOK 1,670.3 million) profit for the third quarter of 2019. The long haul, low-cost airline, which has finished the previous year with millions in losses, is doing relatively well in 2019, as it reached its “highest ever” quarter results despite setbacks like the Boeing 737 MAX grounding.
The Q3 2019 was exceptionally successful for Norwegian, as the airline has reached its best-ever quarterly result of $241 million (NOK 2.2 billion) profit before tax, according to its financial statement released on October 24, 2019. Despite the ongoing trouble with the grounded Boeing 737 MAX, EBITDAR rose from the previous year to $484 million (NOK 4,410 million) and became the highest quarter result that the company has ever recorded.
While the past years for Norwegian has been prosperous in terms of new bases, destinations and international traffic (take, for instance, the fact that the United States is now the airline’s biggest market, leaving the carrier’s home country Norway in second place), the same cannot be said about its finances.
Blaming high jet fuel prices and fierce competition as well as some operational disturbances, the carrier finished the previous financial year with $170.3 million of losses. So in 2019, the carrier announced a series of initiatives to return to profitability, including extensive cost cuts, route optimization, and sale of aircraft.
In particular, the carrier has shifted its strategy from growth to profitability in 2019 and is now implementing measures such as “optimized route portfolio” and #Focus2019 ‒ the aforementioned extensive cost reduction program.
The 737 MAX impact
For the past few years, Norwegian has been having a streak of bad luck with its Boeing aircraft. Just as the struggle with its grounded Dreamliners due to Rolls Royce engine issues was coming to an end, the 737 MAX grounding hit it again.
Norwegian is the largest MAX customer in Europe among airlines, at least among those identified in Boeing’s books. Among European airlines, it was also the most affected by the grounding, as 18 aircraft are already in its fleet.
“The 737 MAX grounding has affected both demand, operating expenses and production,” is outlined among the Q3 2019 results. The effects include lower revenue arising from cancellations and other disruptions, increased costs related to fuel consumption, passenger compensation and crew inefficiencies. Talking in financial terms, the fleet disruptions have resulted in approximately $32.94 million (NOK 300 million) of unforeseen costs in the quarter.
While the company is still assessing the financial impact of the 737 MAX loss of certification, it already counts that a negative impact on the 2019 profit before tax could reach approximately $109 million (NOK 1 billion). Norwegian no longer expects the aircraft to return to service prior to 2020.
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